2014 All-Star Canadian Stocks
Some investors are like elephants – they never forget. That explains why many people still refuse to invest in the stock market even though it has been more than five years since we hit bottom in the crash of 2008-09.
Never mind that the markets have rallied back since. The fear that another collapse could happen at any time continues to haunt people. They prefer to have their money in dependable risk-free guaranteed investment certificates, even though the interest rates offered by the banks are pitifully low.
I understand the caution. The 2008-09 crash almost brought down the international financial system and resulted in the worst economic downturn since the Great Depression. But things have changed. The North American economy is gradually improving, and the outlook for the next few years is positive.
So it’s time to shed those stock market inhibitions and start to earn some higher returns. I’ve put together a package of three Canadian All-Star stocks that I think should be part of all portfolios. These are sound blue-chip companies with strong business franchises, good management, and a solid dividend history. That does not mean the share price will always go up – no one can promise that. But when the inevitable market corrections come along, these stocks will hold up better than most and rebound more quickly. Meantime, you’ll be collecting dividends every quarter.
So here they are: my Canadian Stock All-Stars.
Calgary-based Enbridge is a multi-faceted operation. It is best known for its huge pipeline business, which operates the world’s longest crude oil and liquids transportation system. Enbridge has almost 25,000 kilometres (more than 15,000 miles) of crude oil pipelines, delivering more than 2.2 million barrels of oil a day. It also has an extensive system of natural gas pipelines in Western Canada and Texas and is the largest gas gatherer and transporter in the Gulf of Mexico, transporting approximately 2.3 billion cubic feet a day.
The company is also Canada’s largest retail natural gas distributor, serving Ontario, Quebec, New Brunswick and New York State, with more than two million customers. Enbridge has about 11,000 employees in Canada and the U.S. and has been recognized as one of the Global 100 Most Sustainable Corporations in the world.
The company has a fine long-term record of delivering value to shareholders. Since it was first recommended in my Internet Wealth Builder newsletter in August 1999, the stock has increased in value by more than 550 per cent. The dividend has been raised every year for more than a decade, even during the bitter recession of 2008-09. One more key point: the risk is very low. The shares did drop during the crash but by much less than the broad market, and they recovered quickly. If you only own one stock, this is it.
BCE is Canada’s largest telecommunications company and the owner of Bell Canada, Bell Aliant and Bell Media. Bell Media in turn owns the CTV television network, 35 specialty channels, pay TV services like The Movie Channel and HBO Canada, and radio stations in 55 markets.
Ever since the bid to privatize BCE failed in December 2008, management has been aggressively working to rebuild investor confidence. As part of that process, the dividend has been increased 11 times in less than six years, the latest at the start of 2014. In total, those hikes add up to a 69 per cent increase in the payout, which has contributed to driving up the share price.
This is an ideal stock for income investors.
At the time of writing, the yield on the shares was 5.1 per cent, and the payments are eligible for the dividend tax credit if held outside a registered plan, which means they are taxed at a lower rate.
This is a large stable company that offers an excellent dividend and has long-term growth potential.
I personally own shares in each of these companies. Over the long term, you’ll make a lot more money from these stocks than any GIC will pay.